Tiffany & Co. reported a 3 percent dip in worldwide sales in its second quarter, with sales in the Americas falling 4 percent.
New York—Tiffany & Co. reported a dip in sales in the Americas and worldwide in the second quarter, with the jeweler citing weak spending among tourists and locals and unrest in Hong Kong as the reasons.
Net sales in the second quarter fell 3 percent to $1.05 billion, compared with $1.08 billion in the previous second quarter.
Worldwide same-stores sales were down 4 percent.
In a company press release, CEO Alessandro Bogliolo said the quarter was “mixed,” noting “weak demand from foreign tourists, currency exchange rate pressures, and continuing business disruptions in Hong Kong.”
“We are actively managing what is in our control and positioning our brand to win, accelerating new product introductions and keeping a visible profile,” he said.
Gross profit fell about 5 percent to $657.7 million, or about 63 percent of sales, compared with $688.8 million, or 64 percent of sales, a year ago.
A lower gross margin was attributed to an increase in high jewelry sales.
Net sales in the Americas, where the most Tiffany stores are located, were down 4 percent to $455 million due in part to a dip in sales from both local and foreign customers. Same-store sales in the region also fell 4 percent.
European sales fell 4 percent to $116 million while same-store sales were down 6 percent. The company pointed to foreign currency translation and “broad-based regional softness.”
Asia-Pacific sales slipped 1 percent to $298 million, which the company attributed to foreign currency translation as well as the opening of new stores and increased wholesale sales.
Same-store sales were down 3 percent.
In Hong Kong, unrest led to six days of unplanned store closures, said Chief Financial Officer Mark Erceg on Wednesday morning’s earnings call.
Hong Kong is the company’s fourth-largest market and “critically important,” he said, accounting for a mid-single-digit percentage of total sales.
Erceg warned that if the ongoing unrest continues at its current state, Tiffany’s full-year sales and EPS (earnings per share) could come in at the lower end of its guidance range.
“If the situation were to deteriorate even further, or if the current level of unrest is maintained for the balance of the fiscal year, we may find ourselves toward the bottom end of our ranges,” he said.
CEO Bogliolo dedicated several minutes of the earnings call to outlining what the company is doing to boost its presence and sales in the Chinese market.
He said the retailer is focusing on and investing in mainland China.
plans to open two new flagship stores within the next two quarters, one in Hong Kong and one in Shanghai. Both will feature a Blue Box Café.
Tiffany & Co.’s Blue Box Café in its New York City flagship store
In an effort to reach Chinese travelers, the company is expanding its airport store presence with a duty-free store in the Beijing airport and is upgrading its Hong Kong airport store to a full-size duty-free store.
In Japan, second quarter sales were unchanged, totaling $155 million, while same-store sales were down 1 percent.
Sales from the “other” segment, which includes five Tiffany stores in the United Arab Emirates, fell 29 percent to $25 million as wholesale diamond sales grew.
Breaking it down by category, sales from Tiffany’s jewelry collections, which includes lines like “Tiffany T” and “Paper Flowers,” were unchanged.
Engagement jewelry sales fell 3 percent while sales of jewelry from designers such as Elsa Peretti, Paloma Picasso and Tiffany & Co. Schlumberger dropped 10 percent.
Bogliolo said the company plans to “properly refresh our product assortment,” by fiscal 2021.
A colorful “Tiffany T” collection has been introduced in select stores as well as its recently launched men’s jewelry line. A new fragrance launch is in the works as well, he said.
The company plans to introduce more gold jewelry, with and without diamonds, and diamond jewelry to increase its average unit selling price, said Erceg.
He noted that the company was “gradually” moving into offering higher-price-point jewelry by “focusing on and growing gold and diamond jewelry collections and high jewelry at a faster pace than engagement and silver jewelry.”
He added that Tiffany’s website has been reframed to reflect this shift, showcasing its gold and diamond jewelry more prominently.
The engagement and silver jewelry segments are still expected to grow, said Erceg, but at a slower rate.
As of July 31, there were 322 Tiffany stores in operation, including 124 in the Americas, compared with 320 a year ago.
Looking ahead, Tiffany expects worldwide net sales to increase by a low-single-digital percentage over the previous year.
Lenore Fedowis the senior editor, news at National Jeweler, covering the retail beat and the business side of jewelry.
